Economy to stall out by next summer: panel

Mon Oct 6, 2008 1:25pm EDT
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By Frank Pingue

TORONTO (Reuters) - Canada's economy will show little or no growth for much of the next year, paving the way for lower interest rates, a group of leading Canadian economists said on Monday.

The comments were made at an emergency panel discussion held by the Economic Club of Toronto to talk about the global economic crisis that has ravaged stock markets.

All five of the economists seemed to agree that financial problems will continue to radiate out of the United States and add stress to other economies, including Canada's.

"By the end of next summer, compared to where we are today, I suspect we will have little, if any, growth in Canada, the U.S., and a very soft period of economic activity in Europe as well," said Bank of Nova Scotia Chief Economist Warren Jestin. "And, as a result, I suspect interest rates will come down."

Jestin's comments followed a Scotiabank report by three of his colleagues that said Canada is headed for a recession because of lower commodity prices, a softer housing market and weaker retail sales.

Despite his expectations for slowing economic growth, Jestin said the fundamentals that drove the Canadian dollar above the U.S. dollar for the first time in more than 30 years last November remain intact and will keep the currency from falling below the 90 U.S. cent level.

He said Canada's good fiscal situation relative to other countries and its trade position, which is deteriorating but still better than many others, will eventually drive the Canadian dollar higher.

Toronto-Dominion Bank Chief Economist Don Drummond said he expects little or no growth in North America and much of the developed world, including Europe and Japan, until late 2009.   Continued...